2006 (8) TMI 512 - HC - Income Tax

Reopening of assessment u/s 147 - existence of speculative loss - Held that - There is nothing new which has come to the notice of the revenue. The accounts had been furnished by the Petitioner when called upon. Thereafter the assessment was completed under section 143(3) and now, on a mere relook, the officer has come to the conclusion that the income has escaped assessment, thus this is not something which is permissible under the proviso to section 147 which speaks about a failure on the part of the assessee to make a proper return - in favour of assessee.

Summary

Issues:
Reopening of assessment under section 147 of the Income Tax Act for the assessment year 1999-2000.

Analysis:
The High Court of Bombay heard submissions from both parties regarding the reopening of assessment for the assessment year 1999-2000 under section 147 of the Income Tax Act. The Petitioner, a public limited company engaged in non-banking financial activities, had its income determined as Rs. 27.72 crores in the earlier assessment. The 1st Respondent sought to reopen the assessment based on a loss of Rs. 19.86 crores incurred by the company in trading shares during that year. The officer concluded that this loss, being speculative, had escaped assessment, leading to the order under section 147 of the Income Tax Act, despite almost four years passing since the original assessment.

The Petitioner argued that the reasons for reopening were based on documents already furnished by them, with no new information coming to light. The Petitioner's counsel contended that this reanalysis and subsequent conclusion of escaped income were impermissible under section 147, as there was no failure on the part of the assessee to make a true return. The Respondents cited a judgment by the Apex Court in a similar case involving false loan transactions, where reassessment proceedings were deemed valid due to the discovery of false entries. Another judgment highlighted by the Respondents allowed reopening based on subsequent specific and reliable information, such as a confession by the Managing Director regarding cash loans.

The High Court found that in the present case, no new information had surfaced after the initial assessment, and the accounts had been duly furnished by the Petitioner. The Court concluded that the officer's reanalysis leading to the reopening was not permissible under the proviso to section 147, which requires a failure on the part of the assessee to make a proper return for reassessment. Therefore, the Court allowed the petition, quashing and setting aside the notice directing the reopening of the assessment for the year 1999-2000. The ruling was made absolute with no order as to costs.